The full automation of automobiles seems closer than ever, as car manufacturers accelerate their development. But insurers are warning consumers that it is too soon to hope for lowered insurance costs when the technology is not yet fully understood.
Reuters reported that the global market for advanced driver assistance systems (ADAS) is expected to reach over $67 billion by 2025, growing more than 10% each year. Some 20 auto manufacturers have promised to outfit nearly every new vehicle they produce with forward collision warning and city-speed automatic emergency braking by 2020.
ADAS has the potential to make roads safer – so much, that Swiss Re AG projected that the technology could reduce motor accident frequencies by up to 25%. This could lead to a slash in global insurance premiums for fully ADAS-equipped cars by $20 billion by 2020, the firm suggested.
But insurers in America remain skeptical of ADAS, saying the industry still lacks sufficient data to confirm auto manufacturers’ claims of safety benefits from such systems. Because of this gray area, some insurers remain on the fence when it comes to giving auto insurance discounts to ADAS cars.
“We’re not going to go against the data and create any type of false discounts for the purposes of marketing at this point. We just want to make sure the rate is reflective of the risk that it brings,” Allstate’s vice president of pricing Steve Armstrong told Reuters.
“We’re stuck in a murky in-between,” commented Westfield Insurance national auto claims leader Jennifer St. John. “ADAS have shown to provide real world benefits, but there really isn’t a great deal of commonality in terms of what’s out there.”
The higher repair costs of these ADAS cars are also worrying insurers. Research by AAA revealed that that when the sensors and cameras central to ADAS – typically installed in a car’s bumper or windshield – are damaged, they can double the cost of even minor collisions.
“There’s no such thing as a $300 bumper anymore. It’s closer to $1,500 in repair costs nowadays,” warned The Hanover Insurance Group executive vice-president Richard Lavey.
While manufacturers have promised to outfit their cars with ADAS features in the near future, most automated driving systems today are still sold as optional equipment – this makes it difficult for insurers to validate which features end up on a specific car. And insurers are reluctant to trust their consumers to correctly identify which types of ADAS their cars have.
The consistency of ADAS systems has also been called in question by insurers. ADAS features can differ in performance and description, and some systems might vary across different model cars.
“The only way you can adequately price is by getting more data to understand what a vehicle has and whether it makes a difference,” said Thatcham Research director Matthew Avery.
To complicate matters, not all manufacturers are willing to share data on ADAS technology. According to Tom Karol, who serves as general counsel of the National Association of Mutual Insurance Companies, auto manufacturers have cited proprietary and competitive reasons for not sharing any details about their ADAS.
Fortunately, the insurance industry has taken the initiative to address some of these issues. For instance, Swiss Re is leading efforts to create a global ADAS risk score, as well as a mechanism that would allow car manufacturers to supply data to Swiss Re, which will in turn recommend discounts to insurers.
“If we say these cars are safer, insurers are more prone to believe us as we take part of the risk [as an auto reinsurer],” Swiss Re’s head of products and technology Sebastiaan Bongers told Reuters.
